People seem to be so used to inflation that they don’t see that it is a major peril to the economic system of America. And when inflation starts to spike, you will be unable to maintain your present standard of living. Just how low your standard of living will sink depends ENTIRELY on the steps you take NOW to protect your purchasing power.
For most people living in America today, inflation has been a part of their lives throughout their entire lifetime. And they’ve been able to live, raise families, go on vacations and even same some money in spite of inflation.
So what’s the big deal?
To understand inflation you must first understand how money works.
Money is a medium of exchange that makes it easier to buy and sell. Over human history, people have used livestock, beads, precious stones, salt, precious metals…a plethora of different physical items to facilitate commerce. But over time gold and silver have risen to the top of the list of widely accepted “real money.” You can read more about “real money” at my article Money, Inflation and Slicing a Pizza.
Governments over history have issued gold and silver coins as money. Then, they began to issue paper IOUs called “notes.” The paper notes usually made a written promise that if the bearer presented the note at the Treasury or a bank, he would receive physical gold or silver in the amount of the note. For example, if you presented a $100 note, the bank or Treasury would hand you a certain WEIGHT of gold. The “dollar” is a unit of weight, not a unit of money. Under the gold/silver standard, governments could only issue as many notes as the value of the precious metals in the vault. Under the gold/silver money system, no inflation can occur…EVER…since there are only as many notes as represent the value of the underlying precious metals.
Over time, people used the notes in place of the real money for simple convenience. The people even began to call the paper notes “money.” But that did not change the fact that gold and silver is the ONLY REAL MONEY.
In time, the Treasury and banks noticed that only a small percentage of people ever presented their notes for real money. So they began to issue more notes than the gold in the vault. That allowed the government to spend more money without taxing the people. But it also diluted the value of the currency notes.
Diluting the value of the currency notes is Inflation.
Over time, the government learned that if they completely decoupled the currency from gold and silver, they could print as much currency as they wanted to without any restriction whatsoever. The final act of decoupling the US currency from gold happened in 1971 when Richard Nixon ended trading of gold at the fixed price of $35/ounce. At that point for the first time in history, formal links between the major world currencies and real commodities were severed.
Now look at any of your paper money. The Federal Reserve notes only say that “this note is legal tender for all debts, public and private.” No more convertibility. Your currency is only worth what it will buy on a day-to-day basis.
Inflation make your money worth less, and eventually worthless. Inflation is also created when currency is de-linked from gold or silver.
There are a lot of lies out there about inflation. The government and the media like to say that price increases are all about evil companies trying to plunder the consumer. But inflation looks just like a price increase. Nobody is willing to say that, in order to maintain profitability when money becomes worth less, the merchants have to collect more dollars just to keep from going backward. The plunderers are the governments who issue currency without underlying gold in a 1:1 ratio.
The RATE of inflation is bad enough. But the RAPIDITY of the increases in inflation is part of the danger looming over the horizon.
Let me give you a simple example. I bought a 16 oz. loaf of bread for about $2.00 last weekend. If the price increased to $4.00, that would be an inflation rate of 100%. But how fast it happens matters.
If the prices went up in a week, most people would be exceedingly alarmed. You’ve already seen this kind of price swing when fuel prices spiked a couple years ago. In many places in America, prices for fuel doubled in mere days. That price spike was NOT inflation, but you know how it feels.
However, what if that price of a loaf of bread only increased by 2% a week? That would only increase by four cents the first week. You’d hardly notice at all. You might even complain, but you’d keep buying bread. But if you have a calculator that can compute interest, you’ll find that the government can increase inflation by 100% in only 35 weeks if they only use a 2% rate of inflation.
The US Federal Government freely admits to an inflation rate of about 3-4% per year. They actually count on it. So, the average American watches 3-4% of his purchasing power dissolve, and it all looks just like price increases for goods and services.
Now, what if the inflation rate was 100% per quarter…per month…per week? That kind of inflation has happened MANY TIMES in just the last 80 years. It happened in Germany after WWI. It happened in Argentina in the 80s, when the inflation rate topped 5,000%. It happened in Zimbabwe less than five years ago when their currency collapsed altogether. (Read I Just Became a Trillionaire!)
How does this affect YOU?
Your wages will not rise at the same rate as the inflation rate. So, if your income and expenses are pretty much balanced right now…and your expenses increase by 100% and your wages don’t change…what will you do? You will either increase your income or cut your expenses, or a combination of both. To increase your income, you may have to get a second or third job. To cut expenses may mean you have to choose between paying one creditor or another. You may have to stop all restaurant meals, or turn off your air conditioner, or have a yard sale. But when you sell all your old stuff…and use up your assets…and can’t earn any more…THEN what will you do?
This is the reason that inflation is so evil. When governments print money that has no underlying asset, they are counterfeiting. If you write a bunch of bad checks…another kind of note…you go to jail. But the government gets away with this crime for decades and no one goes to jail. The US Treasury and the Federal Reserve are the biggest counterfeiters in the history of the world.
Now you understand why we here at DumpDC.com bang the drum about the monetary policy of a new nation after secession. If the new nation starts to be counterfeiters just like the US Federal Government was, you KNOW that the people running your new nation are criminals…just like the ones in Washington.
The ONLY real chance that a seceding state has to be totally free is to create a monetary system backed by gold and silver. ANYTHING ELSE won’t work. ANYTHING ELSE IS THEFT AND PLUNDER.
Secession…WITHOUT TAXATION…is the Hope for Mankind.
DumpDC. Six Letters That Can Change History.
© Copyright 2010, Russell D. Longcore. Permission to reprint in whole or in part is gladly granted, provided full credit is given.